How to Set Up Nest Pension Scheme on Xero

If you are an employer in the UK running payroll through Xero, you are legally required to assess your staff for auto-enrolment and enrol eligible employees into a workplace pension. Nest (National Employment Savings Trust) is a government-backed pension provider widely used by small and medium-sized businesses, and Xero offers integration to help automate pension deductions and submissions.

Setting up your Nest pension scheme within Xero ensures that pension contributions are calculated accurately and reported directly to Nest each time you run payroll. This article explains the step-by-step process to connect and configure Nest in Xero and how to manage contributions going forward.

Before you start

Make sure your Nest pension scheme is fully set up with Nest directly. You will need:

• Your Nest employer reference number

• Your Nest group name

• Your Nest payment source

• Your account login credentials

If you are unsure about any of these details, log into your Nest employer portal or contact Nest support before attempting to integrate with Xero.

You should also ensure that your payroll settings in Xero are accurate and up to date, including employee information, salaries and working hours, as this data will be used to assess pension eligibility and calculate contributions.

Connecting Nest to Xero

Once your Nest scheme is active and ready, log into your Xero account and go to the Payroll menu. Select “Pension Filing” from the settings section. Here you will be prompted to enable pension filing and select Nest as your provider.

You will be asked to enter your Nest credentials and authorise Xero to communicate with Nest. This authorisation process uses secure credentials and typically takes just a few minutes. Once authorised, Xero will be able to send contribution schedules to Nest every time you process payroll.

You will also need to link the Nest group and payment source to your payroll account in Xero. This step ensures that contributions go to the correct scheme and that your employee data is submitted correctly. Once the group is connected, you can begin assigning employees to it.

Assessing employees for auto-enrolment

When you run your first payroll in Xero with Nest connected, Xero will automatically assess your employees against the current auto-enrolment criteria. These include age and earnings thresholds set by The Pensions Regulator.

Xero will indicate which employees are eligible for enrolment and prompt you to enrol them. You can then review the assessment, add postponement dates if needed and proceed with enrolment.

Xero will also generate the required statutory communications for your employees, which you can print or email directly. These include letters explaining their enrolment status and their right to opt out or opt in depending on their eligibility.

Managing contributions and submissions

After enrolment, pension contributions will be calculated each time you run payroll. These will appear on your payslips and be included in your pay run summary. You will have the option to review contributions and make any corrections before approving the payroll.

Once payroll is approved, Xero will automatically generate the Nest contribution file and submit it to Nest using your authorised connection. You do not need to log into Nest to upload the file manually.

Payment of contributions still needs to be made via your Nest portal or by Direct Debit, depending on your payment settings with Nest. Xero does not process the actual payment — it simply handles the data submission.

Ongoing administration

Xero continues to assess employees for auto-enrolment each time payroll is run. If new employees become eligible, Xero will alert you and give you the option to enrol them. You can also manage opt-ins, opt-outs and re-enrolments through the Xero payroll dashboard.

If an employee leaves, contributions stop automatically once their employment status is updated in Xero.

It’s important to keep your payroll and pension settings under regular review, particularly at staging dates, re-enrolment deadlines or if there are any regulatory changes from The Pensions Regulator or Nest.

Final thoughts

Setting up your Nest pension scheme on Xero simplifies auto-enrolment compliance and saves you time by automating assessments, enrolments and pension data submissions. While the initial setup requires careful attention to detail, the ongoing process becomes highly efficient once configured correctly.

By integrating Nest with Xero, you ensure that your business meets its legal duties while keeping payroll and pensions in one streamlined system. As always, if you are unsure about compliance or setup details, speak with your accountant or a qualified payroll adviser.